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Weighed for weeks by fears over potential scandals and a feud with Apple, Facebook shrugged off those worries Wednesday. The company smashed expectations and gave investors plenty of reasons to cheer about its near-term future.
Facebook (ticker: FB) stock surged roughly 6% to $326.40 in afternoon trading Thursday. If the stock closes above $313.09 it will mark a new high.
Government-ordered lockdowns due to the Covid-19 pandemic forced people into their homes and the ad dollars followed. The chase to digital devices resulted in Facebook scooping up $9.5 billion in first-quarter profit, and growing its overall revenue nearly 50% to $26.2 billion.
Wednesday’s strong earnings and Thursday’s share move have begun to reflect the value locked up inside the company. Earlier this month Barron’s argued shares were underappreciated given the lucrative current and future opportunities for the business.
Wall Street appeared thrilled by the Facebook’s latest quarterly report card. Nearly 30 sell-side analysts increased their target prices Thursday, according to a Barron’s count.
BMO Capital Markets analyst Daniel Salmon wrote that Wednesday’s results gave him more conviction that Facebook is an excellent stock. He bumped his target price to $420 from $375, and elevated shares to his top pick among the companies he covers.
Salmon’s justification: revenue growth and guidance were powerful, and finance chief David Wehner ‘s comments about the impact of the fight over ad tracking with Apple suggest that it won’t hurt the business as severely as investors had thought. Salmon said that investors should focus on the company’s core advertising business and look for improving multiples from more disclosure about its commerce platform as well as its augmented and virtual reality efforts.
Stifel analyst John Egbert raised his target price to $400 from $350, and reiterated his Buy rating on shares. Egbert justified the increase because the company delivered its fastest advertising growth in more than three years and its second-highest quarterly operating income as a public company.
“Facebook’s results were driven by robust, broad-based demand from advertisers across channels, aided by the company’s burgeoning commerce initiatives,” Egbert wrote.
For Baird analyst Aaron Kessler, Facebook shares look more attractive after Wednesday’s earnings too. He raised his target price to $415 from $360 and said the valuation is still attractive at 19.5 times the his bank’s 2022 per-share earnings estimate.
Kessler said the company’s advertising business grew across the world. During Wednesday’s conference call, Facebook said commerce, retail, consumer goods, and small and medium businesses had a particularly good quarter. Ad pricing also improved compared with the fourth-quarter, and was up 30% compared with the year-ago period, Kessler noted.
Of the analysts that cover Facebook stock, 50 rate the company a Buy. Five rate Facebook stock a Hold and three have a Sell on the name. The average target price is $371.94, which implies an upside of about 14%
Facebook shares have advanced 9.2% since Barron’s cover story, as the S&P 500 index gained 4.1%. The Nasdaq Composite index rose 4.1% as well.
Write to Max A. Cherney at [email protected]
